Introduction
The Hon’ble Supreme Court vide its recent judgment in Bharat Sher Singh Kalsia v. State of Bihar & Anr.[1] adjudicated inter alia upon repugnancy in clauses when construing/ interpreting a deed or a contract. It was categorically held that where the earlier and later clause of a deed cannot be reconciled, the earlier clause would prevail over the later clause in accordance with themaxim of ut res magis valeat quam pereat[2].
Brief Background:
One, Mr. Man Vijay Singh (“Respondent No.2/Informant/Landowner”) alleged inter alia that one Mr. Raj Kumar Karan had sold off a property belonging to the Informant and the Informant’s family in contravention of a Power of Attorney (“PoA”) executed between the parties. It was submitted that such property was sold to one Bharat Sher Singh Kalsia (“Appellant/ Purchaser”) by misusing the PoA, mis-appropriating the property and executing a fraudulent sale deed dated August 24, 2000 (“Sale Deed”). Accordingly, an FIR was registered under Sections 467, 468, 469 and 471 of the Indian Penal Code, 1860 (“IPC”). Thereafter, the Appellant sought an application – C.M. No.42776 of 2013 – before the Hon’ble Patna High Court (“HC”) for quashing the aforementioned FIR. The HC vide its judgment and order dated March 12, 2021 (“Impugned Judgment”), dismissed the Appellant’s application. Aggrieved, an appeal, being Criminal Appeal No.523 of 2024 was sought by the Appellant before the Hon’ble Supreme Court.
Contention of the Parties
It was broadly contended on behalf of the Appellant that the Sale Deed was executed in accordance with Clause 3 of the PoA[3], in as much as it empowered the PoA holder to execute any type of deed on behalf of the Landowner and have it registered. Thus, it was argued that the Appellant could not be held liable for any misdeed, much less a criminal act.
On the other hand, the Landowner relied on Clause 15 of the PoA[4] to submit that the authority to sell remained with it and that the PoA holder was merely empowered to have such sale registered on its behalf.
Findings of the Hon’ble Supreme Court
Re: Interpretation of Clauses 3 and 15 of the PoA
The Hon’ble Supreme Court categorically observed that when interpreting clauses of a deed, the court’s endeavour should be to harmoniously construe all clauses to render them effective and non-otiose. Thus, the court is required to test the concerned clauses and ascertain whether they can be independently given effect to, and not be in conflict with other clauses.
Applying the aforementioned test in the present case, the court observed that Clause 15 of the PoA (which states that the PoA-holder is authorised to present deeds/ documents signed by the Landowner for registration) was in addition to and not in derogation of Clause 3 of the PoA. In reconciling Clause 3 and Clause 15 of the PoA as detailed above, the Court held that “besides the contingencies where the PoA holder had been authorised to execute any type of deed, receive consideration and get registration done, which included sale of movable/ immovable property on behalf of the landowners/ principals, the land owners/ principals had also retained the authority that if a Sale Deed was/ had been signed by them, the very same PoA holder was also authorised to present it for registration and admit to execution before the authority concerned.” Thus, the Court held that the clauses of the PoA are capable of being construed in such a manner that they operate in their own fields and are not rendered nugatory.
Re: General principles of repugnancy in clauses
The Hon’ble Supreme Court further observed that if Clauses 3 and 15 of the PoA are in conflict, and cannot be reconciled, Clause 3 being the earlier clause would prevail over Clause 15. Thus, generally, where there is conflict between two or more clauses of a deed/ contract, and the same cannot be harmoniously construed, the earlier clause will prevail over the subsequent one. The Court in this regard relied on the Privy Council judgment of Forbes v Git[5], as well as a 3-Judge Bench decision of the Supreme Court in Radha Sundar Dutta v Mohd. Jahadur Rahim[6], wherein it was held that “11…it is a settled rule of interpretation that if there be admissible two constructions of a document, one of which will give effect to all the clauses therein while the other will render one or more of them nugatory, it is the former that should be adopted on the principle expressed in the maxim “ut res magis valeat quam pereat”.
Re: Criminal proceedings against the Appellant
The Hon’ble Supreme Court also observed that given that the present dispute is between the Landowner(s) and the PoA-holder, it would be improper to drag the Appellant as the purchaser of the property into criminal litigation, “when he had no role in the execution of the PoA nor any misdeed by the PoA-holder vis-à-vis the land-owners/ principals. Moreover, the entire consideration amount has been paid by the Appellant to the PoA-holder.” In view thereof, the Hon’ble Supreme Court set aside the Impugned Judgment and quashed the FIR registered in the present matter.
Conclusion
The present judgment not only reiterates important principles of harmoniously interpretating a deed/ contract at the adjudication stage, it also underscores the importance of clear, unambiguous and careful drafting of contracts. The rights, obligations and intent of parties are put forth in various clauses of a contract, and upon a breach of the same, certain consequences and remedies follow. Thus, the present judgement reiterates the need to take utmost care at the stage of negotiation and drafting to ensure that there is no scope of inconsistency between the various clauses of a contract, to effectuate the actual intention of parties. This also ensures that the parties do not/ cannot take undue advantage on account of repugnancy.
For further information, please contact:
Vikash Kumar Jha , Partner, Cyril Amarchand Mangaldas
vikashkumar.jha@cyrilshroff.com
[1] Criminal Appeal No.523 of 2024.
[2] This maxim means “to give effect to the matter rather than having it fail”
[3] Clause 3 of PoA: “To execute any type of deed and to receipt consideration, if any, on our behalf and to get the Registration done of the same.”
[4] Clause 15 of PoA: “To present for registration all the sale deeds or other documents signed by us and admit execution there of before the District Registrar or the Sub-Registrar or such other Officer as may have authority to register the said deeds and documents as the case may be and take back the same after registration.”
[5] [1922] 1 AC 2564
[6] AIR 1959 SC 24
